SEC clamps down on Exxon Mobil

03/24/2016

In its ruling the SEC has said Exxon Mobil must adopt a climate change resolution in its next shareholder’s meeting in May this year.

In what has been seen as a sign of defeat for the world’s biggest publicly traded oil producer, the Securities and Exchange Commission (SEC) of the United States has ruled that Exxon Mobil Corp will have to include a climate change resolution on its annual shareholder proxy. On its part, Exxon has argued that it has already provided adequate carbon related disclosures.

In its letter to Exxon, the SEC has said stated that the oil giant cannot keep the NY state’s comptroller’s proposal from reaching its shareholders for a vote at its annual meeting in May.

If the proposal is approved by the shareholders it would force Exxon to outline specific risks related to climate change or legislature designed to curb it, for it to operate profitably.

On its part, Exxon has argued the proposal that it received was very vague. Moreover it already provides its shareholders with carbon-related information, which includes a 2014 report on its website with the title "Energy and Carbon – Managing the Risks."

The SEC has countered saying information provided by the company does not go far enough.

"It does not appear that Exxon Mobil's public disclosures compare favorably with the guidelines of the proposal," wrote Justin Kisner, an attorney-adviser with the SEC, to Exxon Mobil.

"We'll be communicating the board's recommendations on shareholder resolutions through the proxy document next month," said Alan Jeffers, Exxon’s spokesman.

Given the above scenario, Exxon’s shareholders have so far never approved a climate related proposal. In fact last year they overwhelmingly rejected a request that a climate change expert be appointed in its board of directors. Thus, it is unclear how the SEC proposal will play out.

In spite of this, Thomas DiNapoli, the New York state Comptroller who oversees the state's $178.3 billion pension fund, portrayed the decision taken by the SEC as a "major victory" for shareholders.

"Investors need to know if Exxon Mobil is taking necessary steps to prepare for a lower carbon future, particularly now in the wake of the Paris agreement," said DiNapoli in a statement, in reference to the Paris accord.

As expected, environmentalists have cheered the SEC's decision.

"The SEC has rejected Exxon's attempt to silence investors' concerns about the very real financial risks associated with climate change," said Shanna Cleveland of Ceres, a nonprofit group that tracks environmental records of public companies.

Battle Hardened Exxon Mobil The fight with the SEC is one of many fights Exxon Mobil is facing in carbon related battles. This includes an enquiry by Eric Schneiderman, NY’s Attorney General, into whether the company misled shareholders and the public on climate change related risks facing the company.

With Schneiderman subpoenaing the company for a treasure trove of records, Exxon Mobil has hired Theodore V. Wells, Jr., a star attorney. He has fought companies for years on various issues including climate change. In fact, last year he settled an eight year old investigation with Peabody Energy, a coal company, which forced it to amend its climate change disclosures so as to make them more robust.

In another significant development, the Rockefeller Family Fund has disclosed that it will divest itself from fossil fuels as quickly as possible and thus "eliminate holdings" of Exxon.

Exxon Mobil’s share fell by 0.2% after the SEC ruling in after-hours trading to $83.63.